According to legal sources on Thursday, Young Poong recently submitted a shareholder derivative lawsuit to the Seoul Central District Court, claiming Korea Zinc's directors failed to fulfill their duty of due care, resulting in damages of around 673.2 billion won. It seeks that amount in compensation.
Young Poong argues that Korea Zinc's board conducted a tender offer to buy treasury stock at around 890,000 won per share, while the stock was trading at approximately 560,000 won per share, acquiring a total of 2,040,030 shares. The company allegedly suffered a loss equivalent to the difference between these prices multiplied by the number of shares acquired.
This amount, however, excludes interest expenses on funds Korea Zinc raised through commercial papers, corporate bonds, and loans from financial institutions to finance the treasury stock purchase.
As Korea Zinc’s board recently canceled a share sale worth 2.5 trillion won intended to repay these loans, annual interest costs, estimated to be around 100 billion won, could add to the damages claimed.
Of Korea Zinc's 13 board members, 10 directors, including Chairman Choi Yoon-beom, are named in the lawsuit.
A shareholder derivative lawsuit allows shareholders to pursue accountability on behalf of the company when it neglects to hold directors responsible for damages.
If the plaintiff shareholders win, the compensation will go to the company rather than to the shareholders themselves. According to commercial law, shareholders who own at least one percent of a company’s total issued shares -- set at 0.01 percent for companies that are publicly listed -- must first ask the audit committee to file a lawsuit on their behalf. If the committee fails to do so within 30 days, a derivative lawsuit can proceed.
Young Poong and MBK Partners explained that they filed the derivative lawsuit after requesting the audit committee to take legal action more than a month ago, receiving no response.
On Wednesday, Korea Zinc withdrew its plan to issue 2.5 trillion won in new shares following regulatory scrutiny and shareholder opposition. Later that day, Chairman Choi Yun-beom announced he would step down as board chairman at the earliest opportunity.
Korea Zinc was co-founded in 1974 by Chang Byung-hee and Choi Ki-ho, with the Choi family now overseeing the company’s management while the Chang family controls Young Poong and its affiliated electronics businesses. Competition between the two families has escalated since Choi took over as chairman in 2022.
Copyright ⓒ Aju Press All rights reserved.